Oil tum­bles nearly 4% on doubts over OPEC pro­duc­tion cut

Arab News - - BUSINESS -

NEW YORK: Oil prices fell al­most 4 per­cent on Tues­day on signs lead­ing oil ex­porters in OPEC were strug­gling to agree on a deal to cut pro­duc­tion to re­duce global over­sup­ply.

Brent fu­tures were down $ 1.80, or 3.7 per­cent, at $ 46.44 a bar­rel by 1551 GMT. US crude fell $ 1.79, or 3.8 per­cent, to $ 45.29 per bar­rel. That was the big­gest daily per­cent­age de­cline for Brent since early Septem­ber.

The Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries will meet in Vi­enna on Wed­nes­day aim­ing to im­ple­ment a deal out­lined in Septem­ber to cut out­put by around 1 mil­lion bar­rels per day ( bpd), from around 33.82 mil­lion bpd in Oc­to­ber.

But Iran and Iraq were re­sist­ing pres­sure from Saudi Ara­bia to cur­tail oil pro­duc­tion, mak­ing it hard for OPEC to reach an agree­ment. That has led some an­a­lysts to sug­gest the meet­ing may fail to reach a deal or pro­duce one that is un­work­able.

“The in­abil­ity to ar­rive at a frame- work for a rea­son­able agree­ment af­ter 2- 1/ 2 months of Saudi driven dis­cus­sions strongly sug­gests any for­mal com­mu­nique to re­strain out­put will be a wa­tered down ver­sion,” Jim Rit­ter­busch, pres­i­dent of Chicagob­ased en­ergy ad­vi­sory firm Rit­ter­busch & As­so­ci­ates, said in a note.

Rit­ter­busch, how­ever, said he be­lieves OPEC had a bet­ter than 50 per­cent chance of reaching an agree­ment, which should of­fer some neart­erm price re­lief.

He noted the bur­den of ac­tual cur­tail­ments would likely fall on the Gulf pro­duc­ers. Non-OPEC pro­ducer Rus­sia con­firmed on Tues­day it would not at­tend the OPEC gath­er­ing, but added that a later meet­ing was pos­si­ble.

In­tense negotiations would be needed on Wed­nes­day to ce­ment a deal, Gold­man Sachs an­a­lysts said.

In­done­sian En­ergy Min­is­ter Ig­na­sius Jo­nan said he was not sure OPEC would clinch a deal to limit oil out­put when it met.

“I don’t know. The feel­ing to­day is mixed,” he said, when asked about the prospects of a deal.

If OPEC agreed to cut pro­duc­tion to 32.50 mil­lion bpd, crude prices would likely rise to the low $ 50s a bar­rel, Gold­man said.

“If no deal is reached, our ex­pec­ta­tion of ris­ing (crude) in­ven­to­ries through the first half of 2017 would war­rant prices av­er­ag­ing $45 per bar­rel through next sum­mer,” Gold­man said.

In Asia, OPEC’s big­gest cus­tomer re­gion, oil im­porters made clear they would not be happy with an ar­ti­fi­cial sup­ply cut that hikes prices, and that in case of a cut they would seek more sup­plies from out­side OPEC.

In the US, an­a­lysts polled by Reuters ahead of weekly in­ven­tory re­ports from the Amer­i­can Pe­tro­leum In­sti­tute ( API) in­dus­try group and the US En­ergy In­for­ma­tion Ad­min­is­tra­tion ( EIA) es­ti­mated, on av­er­age, that crude stocks in­creased about 900,000 bar­rels in the week to Nov. 25.

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